Secret 'parallel' money plan clouds start of Greek bailout talks

GMT 22:23 2015 Monday ,27 July

Arab Today, arab today Secret 'parallel' money plan clouds start of Greek bailout talks

Greece's then-finance minister Yanis Varoufakis
Athens - AFP

The Greek government and its international creditors began work on a mammoth new bailout Monday overshadowed by revelations that Greece's ex-finance minister Yanis Varoufakis had been secretly planning for a parallel system of liquidity.

As the European Commission confirmed that technical talks on Greece's third bailout had started in Athens, the embattled leftist government was put on the defensive by Varoufakis's claim to have "hacked" into his own ministry weeks earlier to create duplicate files for millions of Greek taxpayers.

In a telephone conversation with a group of London-based investors after he resigned his post on July 6, Varoufakis claimed that Prime Minister Alexis Tsipras had "given the green light" for a Plan B before coming to power in January, according to a recording released Monday.
The goal, the maverick economist said, was to create a "functioning parallel system" of liquidity in case the European Central Bank cut off support to Greece's banks, as indeed it did after talks with the radical left government on new austerity reforms broke down in June.

Varoufakis said a five-man team under his orders had hacked into the finance ministry and obtained access to the tax file numbers of Greek taxpayers in order to create duplicate accounts.

He said the subterfuge was necessary to avoid alerting Greece's EU-IMF creditors who "fully" control the Greek state's revenue mechanism.

The operation was designed to enable the ministry and also taxpayers to make digital transfers without having to use the banks, which as it turned out had to be shut down for three weeks this month to avert a run on deposits.

"Of course this would be euro denominated but at the drop of a hat it could be converted to a new drachma," Varoufakis said.
"The work was more or less complete," he added.

The Kathimerini daily first broke the story over the weekend, and the recording of Varoufakis's remarks was released Monday by the Official Monetary and Financial Institutions Forum which organised the conference call.

The news touched off a political storm in Athens, with opposition parties demanding an official explanation from the government and threatening to put Varoufakis on trial, and officials around Europe expressing anger.

- 'Two-faced games' -

On Monday, one of them -- Slovakia's hawkish Finance Minister Peter Kazimir -- noted that the plan merely confirmed how "unpredictable" Varoufakis was.
"We need to make sure that such two-faced 'games' will be avoided when debating and drafting the third bailout package for Greece," Kazimir said in a tweet.

Technical teams from the EU, the European Central Bank and the International Monetary Fund returned to Athens to assess the state of the economy, and discuss a new bailout of up to 86 billion euros ($94 billion) over three years to prevent Greece from defaulting on its huge debts.

Tsipras's government this month has pushed through parliament two reform bills tied to the bailout that triggered a major mutiny in his Syriza party.

Speaking at a meeting of party leaders Monday, Tsipras pointedly asked whether "there was any realistic alternative" to accepting the new bailout conditions.

Still, he acknowledged that "differences in direction within the party exist" on how to deal with Greece's debt crisis, and said a congress to resolve those divisions should be organised rapidly.

Those tensions may grow further, however, after an EU source said Monday that Greece would most likely have to approve another round of reforms before any disbursements from the new bailout are made.

"Before any first disbursement, it is likely that Greece will have to push through another set of reforms to reassure European ministers on Greece's commitment to reform. Member states are looking for this," the source said.
The government has not yet officially commented on Varoufakis's claims, but junior finance minister Dimitris Mardas on Monday insisted the plan "was never part of economic policy."

Speaking to the Daily Telegraph, Varoufakis admitted that the quotes were accurate but denied that he had plotted to return to the drachma.

"I have always been completely against dismantling the euro because we never know what dark forces that might unleash in Europe," he said.

A close associate of Varoufakis who worked on the project, University of Texas professor James Galbraith, insisted that the team was "at no time engaged in advocating (euro) exit or any policy choice."

"The job was strictly to study the operational issues that would arise if Greece was to issue scrip or if were forced out of the euro," said Galbraith, son of the late prominent economist John Kenneth Galbraith.


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